Method and system for updating a loan portfolio with information on secondary liens

ABSTRACT

A computer-based method of updating a client loan portfolio with information on secondary liens relatable to portfolio properties includes inputting property data from the portfolio, monitoring a secondary lien database for secondary liens relatable to the property data, and notifying the client if a secondary lien is detected. Notifying the client may include generating a secondary lien report containing an AVM score or a CLTV ratio, and updating the portfolio by generating a new version of the portfolio that includes secondary liens detected during monitoring. A system may include a client station for inputting data for monitoring, an FTP server for uploading the data from the client station, and a mainframe server for standardizing the data, searching databases for secondary liens, calculating the AVM score and CLTV ratio, and generating the secondary lien report for delivery to the client station via the FTP server.

CLAIM OF PRIORITY UNDER 35 U.S.C. §119

The present Application for Patent claims priority to ProvisionalApplication No. 60/705,928 entitled “METHOD AND APPARATUS FOR MONITORINGMORTGAGE PORTFOLIO,” filed Aug. 5, 2005, and assigned to the assigneehereof and hereby expressly incorporated herein by reference.

This application is related to U.S. patent application Ser. No. ______,a.k.a. Snell & Wilmer Dkt. No. 49416-1100 entitled “Method and Systemfor Monitoring for and Reporting of Lien Distress Events,” filedconcurrently herewith, and expressly incorporated herein by reference.

BACKGROUND

1. Field

The present invention relates to real estate loans on properties andmore particularly to a method and system for monitoring loans onproperties and liens associated with those properties, determining whena secondary lien has been filed against a property, and reporting thatinformation to an interested party.

2. Background

When purchasing real property, purchasers often require or desire to usefinancing. During this process, the lender often acquires a lien on theproperty. Liens, usually in one of two forms, enable the lender in thecase of default on repayment of the loan, to either take possession andthen sell the property in order to repay the loan amount or to force asale of the property with first rights to the proceeds of the sale up tothe amount owed on the loan. In either case, this right is referred toas a lien.

There are also varying degrees of liens. The first or primary lender onthe property has a first lien or first position. A second mortgagee hasa second lien or second position. Subsequent liens are prioritizedaccording to a tertiary position, usually in order of recordation. Alender higher in priority is a senior lender with respect to a lenderlower in priority. A lender lower in priority is a junior lender withrespect to a lender higher in priority.

When a sale of a property is made or forced pursuant to the rights ofone lender's lien, other lenders having liens on the same property havea right of repayment in the specified order of priority. So, forexample, a second loan may be taken out on a property in order to makehome improvements on the property, and the corresponding secondarylender may place a secondary lien on the property. In this case, thefirst mortgage lien has first position and the second mortgage lien hassecond position. If either loan defaults, the property may be sold andthe first loan would be paid off prior to the second loan. Any remainderwould be used to pay down the second loan, any remainder thereafterwould pay off tertiary positions, and any final remainder would bereturned to the mortgagor.

A Loan-to-Value (LTV) ratio is the loan amount expressed as a percentageof the purchase price or the appraised value of the property. Forexample, if a buyer makes a 10 percent cash down payment on the propertythe buyer is purchasing, the LTV is 90 percent. Conversely, if a buyermakes a 90 percent cash down payment on the property the buyer ispurchasing, the LTV is 10 percent. If a subsequent mortgage were toencumber the property, the LTV of the property would increase because agreater percentage of the property value would become debt secured bymortgage.

For a potential purchaser of the primary loan, a high LTV signifies agreater risk that the primary loan may not be repaid by the borrower.Borrowers with little equity in the property have less to lose by adefault than those with greater equity. The more equity a property ownerhas in a property, the more money is available to the creditor ondefault. Thus, the primary lender, who has loaned the most amount ofmoney on the property, or someone interested in purchasing the primaryloan, has an incentive to monitor the extent of secondary loans securedby the property. Such information is critical in assessing the LTV, andthus the present risk associated with the first loan.

Investors who are interested in buying and selling portfolios of loanson real estate, and the right to enforce first liens that accompanytransfer of the portfolio, often do not know if a secondary lien hasbeen filed against a collateral property within the portfolio. If asecondary lien has been filed against any property in the portfolio, theLTV of that property can be higher than the LTV represented in the loanportfolio, and consequently the value of the loan, and the value of theportfolio, may be lower than the originally estimated by a potentialinvestor.

A Combined Loan-to-Value (CLTV) ratio takes both primary and secondaryloans into account. CLTV is the ratio of the sum of all mortgage amountsencumbering a property to an estimate of the property worth. While a LTVmay be easily established upon issuing a primary mortgage loan forpurchasing real property, once the sale is finalized, the mortgagor mayfurther encumber the property with secondary loans at any time duringthe life of the primary loan, freely and without notifying the primarylender. Thus, for a lender or financial institution in the business ofexpanding, transferring, or acquiring large loan portfolios, maintainingaccurate, up-to-date CLTV data for all loans within a portfolio becomesa burdensome task, especially in a market where loans are transferredamong investors like commodities. What is needed in the industry is anefficient means for updating loan portfolios to ensure that LTV and CLTVratios may be determined with greater accuracy.

SUMMARY

The present invention provides a method or system for updating a loanportfolio with information on secondary liens affecting the LTV ratio ofproperties within the portfolio. Databases containing informationrelated to properties are monitored to detect secondary liens bymatching property data from the portfolio to property data maintained inthe databases. Once a secondary lien is detected, notice of thesecondary lien may be forwarded to an interested client. Additional datapertaining to the subject property, such as an estimate of its value, aCLTV ratio, tax liability, and other relevant information may bereported along with the notice.

A computer-based method of updating a loan portfolio with information onsecondary liens relatable to a property of interest within the portfolioincludes receiving property data from the client loan portfolio,standardizing the property data into a form for use in querying asecondary lien database, and monitoring the secondary lien database forsecondary liens relatable to the standardized property data. If asecondary lien relatable to the standardized property data is detectedin the secondary lien database, notifying the client of the secondarylien may be performed. The monitoring may be performed periodically, andthe client may specify the monitoring period as well as the content tobe provided in a secondary lien report deliverable to the client. Thestandardized property data may include property address or borroweridentification data, and the secondary lien database may be a publicrecords database, tax assessor database, title transfer database, orcredit reporting database. Any of these databases may be queried forinformation relevant to calculating an Automated Valuation Model (AVM)score, an LTV ratio, or a CLTV ratio, and for other information relevantto the property, lien holders, or mortgagors. In one embodiment, themethod may automatically update a client loan portfolio with secondarylien information. In another embodiment, a client may subscribe to aservice that performs the method.

A system may include a client station for inputting a client loanportfolio, an FTP server for uploading property data from the clientstation, and a mainframe server for accessing one or more secondary liendatabases. The mainframe server may include a data standardizationmodule to standardize the property data received, a database searchengine for searching the secondary lien database, and a reportgenerating module for reporting to the client station via the FTP serversecondary lien information relating to the client loan portfolio.

A method or system of the present invention may enable portfolio ownersand prospective portfolio buyers to quickly and accurately determine,with a high level of confidence, the value of properties reported in aloan portfolio, or the value of the portfolio as a whole. Updating loanportfolios according to the present invention may therefore streamlinethe process of loan portfolio transfer.

BRIEF DESCRIPTION OF THE DRAWINGS

The features, objects, and advantages of the present invention willbecome more apparent from the detailed description set forth below whentaken in conjunction with the drawings, wherein:

FIG. 1 is process flow chart illustrating a method for updating a loanportfolio with information on secondary liens according to an embodimentof the present invention.

FIG. 2 is a method for updating a loan portfolio by reporting secondaryliens and an AVM score according to an embodiment of the presentinvention.

FIG. 3 is a method for updating a loan portfolio by reporting secondaryliens, an AVM, and a CLTV score according to an embodiment of thepresent invention.

FIG. 4 is a system for updating a loan portfolio with information onsecondary liens according to an embodiment of the present invention.

DETAILED DESCRIPTION

The present invention provides a method and system for monitoring forsecondary liens on properties and updating loan portfolios whensecondary liens are discovered. The present invention is useful to alender or financial institution for maintaining current data onproperties within a loan portfolio, and may be particularly useful to aprospective buyer of loan portfolios for making accurate LTV or CLTVcalculations.

FIG. 1 is a flow chart depicting a method 100 for updating a loanportfolio with information on secondary liens. Method 100 may beexecuted as a series of automated instructions stored in memory assoftware, hardware, or combinations thereof, executable by a controller,processor, or processing device. Method 100 may be performed using acomputer system, or using a network of computers, such that one step ofmethod 100 may be performed by one computer, and another step of method100 may be performed by another computer. Method 100 may describe stepsperformed automatically as a service for a subscriber or client.

Method 100 may begin with step 102. In step 102, data relating toproperties may be input or received from a client loan database orportfolio. A client may be a lender or lien holder in possession of aportfolio of loans, or an investor interested in purchasing a loan orloan portfolio. The portfolio of loans may be represented by datapertaining to properties and mortgagors that correspond to each loan andeach loan in the portfolio may be represented by a portion of the data.The portfolio may be stored, e.g., as electronic data in a database orinformation archive, where each loan corresponds to a record that mayinclude a plurality of data fields, where each data field may beupdated, and where each record may be accessed, retrieved, modified,saved, and appended with new fields. Thus, inputting or receivingproperty data from a client loan portfolio may include manuallyinputting data by a user interface, or automatically loading propertydata using software capable of accessing records in the portfolio.

In step 104, the property data input or received from step 102 may bestandardized. Standardizing the property data may involve convertingproperty data input from the client loan portfolio, as necessary, into aform acceptable for querying a lien detection database. In one example,the standardization step may convert property data representing a streetaddress into a form recognizable as a street address by the liendetection database. In another example, the standardization step mayconvert property data representing a mortgagor identity into a formrecognizable as a borrower name by the lien detection database.Converting property data to a form of data recognizable by a liendetection database may require reading the property data and reproducingthe property data in a modified form. For example, the property data maybe converted by rearranging the property data to a recognizable form, orby adding additional operators (e.g., ASCII characters) to the propertydata in a predetermined format. In another example, the property datamay be converted by appending it as an argument within a predefinedfunction. In another example, when property data has been previouslymatched to a record stored in a lien detection database, converting theproperty data may include assigning a unique identifier to the propertydata to designate that it relates to a certain record stored in the liendetection database.

Method 100 may then proceed to step 106. In step 106, one or more liendetection databases may be monitored for liens related or relatable tocustomized property data derived from a client loan portfolio. In oneembodiment, step 106 monitors the lien detection databases for anyrecords containing the identity of the borrowers and/or the address ofthe subject property to discover whether any secondary liens listedtherein match with the borrower identity or the address of the subjectproperty. A lien detection database being monitored may include taxassessments or tax roll information including the name of the owner, theaddress of the property, a legal description of the parcel, the mostrecent assessed value of the property, the taxes due on the property,dimensions of the lot, and other characteristics about the property.Note that a borrower identity may be synonymous with an owner identity,and may include a name, an alias, a social security number, a governmentidentification number, or other personal indicia. In one embodiment,step 106 may search the lien detection databases for any negative creditreporting events, bankruptcy declarations, delinquent payments,defaults, or foreclosures associated with the property address orborrower identity. In other embodiments, step 106 may be performed usingstandardized data from step 104 to monitor for secondary lienscontinuously, periodically (e.g., weekly or monthly), or according to aschedule determined by a client.

Next, step 108 may decide on appropriate action depending on whether asecondary lien is detected while monitoring the lien detectiondatabases. If no secondary lien is detected, the method may progress tostep 110, during which a match code may be set to a negative statusindicating that no match has been found between a search criteria and arecord maintained in any database searched. If a match is found, i.e.,if a secondary lien is detected, the method may proceed to step 118. Instep 118, the match code may be set to a positive status indicating thata match has been detected. In one embodiment, in step 118, the clientmay be promptly notified of the secondary lien or liens detected duringstep 106. In another embodiment, notification in step 118 may includetransmitting an electronic message to the client to alert the client ofthe fact of the secondary lien. In another embodiment, step 118 mayinclude sending to a client a periodic report of secondary lienspertaining to all customized property data derived from the client'sloan portfolio.

The method may monitor available databases to determine whether anysecondary liens are outstanding on a property, and if so, provide timelynotification to an interested party. For example, the method 100 maymonitor a public record database on a weekly or monthly basis for newlyfiled secondary liens. It may not be practical for the portfolio ownerto monitor secondary loan activity with respect to every primary loan itservices. The present invention addresses this problem by automating themonitoring and reporting process on behalf of a lender or prospectivebuyer. Once a client receives notification of a secondary lien, theclient so informed may be better able to determine a more accurate CLTVratio, to update a loan portfolio, or to request additional informationabout the property or its owner. The following embodiments describeadditional methods for practicing the present invention to provide suchadditional information.

FIG. 2 is a flow chart depicting a method 200 for monitoring a loanportfolio for information related to secondary liens. All or a portionof method 200 may be performed automatically as a service to a client,e.g., a lender, a financial institution, or a prospective buyer who mayhave a transactional interest in a loan or loan portfolio, and who maybe in need of an automated service for monitoring properties within theportfolio for discovery of secondary liens.

Step 202 may involve inputting or receiving property data from a clientloan portfolio or a client loan database in a manner similar to thatexecuted in step 102. In step 204, the property address and the identityor identities of the owners of the subject property may be extractedfrom the property data input in step 202. The extracting step 204 mayalso involve a data conversion to convert the property address and owneridentity into a form recognizable as a property address and owneridentity, respectively, by a lien detection database. Alternatively, theextracting step 204 may involve copying that portion of the propertyaddress or owner identity needed to formulate an appropriate query to alien detection database. For example, step 202 may involve inputting orreceiving property data from a client loan portfolio into an electronicdatabase having a format compatible with software executed in step 204.In this example, in step 204, only the property address and owneridentity data may be extracted from the electronic database in step 204,while any extraneous information contained in the electronic database(e.g., information related to the database structure) may not beextracted.

The method may proceed to step 206, in which one or more lien detectiondatabases may be monitored for secondary liens related or relatable tothe subject property. The monitoring step 206 may occur upon clientrequest, or periodically according to a specified period. During thismonitoring step 206, property address and property owner identity dataextracted in step 204 may be used to formulate appropriate searchcriteria for detecting a secondary lien. In the decision block of step208, if a secondary lien is not detected, the method may progress tostep 210, during which a match code may be set to a negative statusindicating that no match has been found between a search criteria and arecord maintained in any database searched. If a match is found, themethod may proceed to step 212 or to step 214. In one embodiment, in anadditional step (not shown), if a match is found, the match code may beset to a positive status indicating that a match has been detected.

Step 212 may be an optional step, to be executed to obtain credit reportinformation in the event that a secondary lien is detected. This stepmay be specified by a client or subscriber, and the credit reportinformation may be obtained on behalf of the client or subscriberaccording to terms of a service agreement. Credit report information mayinclude a portion of data available from a commercial credit reportingservice, or it may include an entire credit report. Credit reportinformation may be obtained, for example, using owner identity dataextracted in step 204 as search criteria for a credit report database.

Step 214 may be performed after step 208 if a secondary lien isdetected. In step 214, an AVM score may be prepared to assess the valueof a property having a secondary lien. An AVM score may be calculated byany type of automated process, such as a computer program, that usesdata on properties comparable to the property being valuated to computean estimate of that property's value. Input data to the AVM model mayinclude the size of a house on the property, the number of rooms andbedrooms, the age of the house, the size of the lot, the address of thehouse, an inclusion radius for selecting comparable homes in samevicinity, recent appraisals and/or sales on comparable properties, andother features or upgrades present in the house or associated with itslocation. This input data may be entered in a previous step of method200, such as in step 202.

Step 216 may be used to generate a secondary lien report. In oneembodiment, the secondary lien report may be maintained in an electronicmemory. In another embodiment, the secondary lien report may bemaintained in an electronic memory and updated with additionalinformation as that information becomes available in the course ofcontinued monitoring of lien detection databases. In another embodiment,step 216 may include printing a hard copy of the secondary lien report.

In another embodiment, following step 216, the secondary lien report maybe delivered to a client upon receiving a client request. By withholdingthe secondary lien report until receiving a client request, thesecondary lien report may be updated over a selected time period, andmay be updated with information pertaining to many properties extractedfrom a client loan portfolio. The secondary lien report in the form of ahard copy may be delivered to a client by mailing, or the secondary lienreport may be delivered to a client electronically by any number ofmethods known in the art. Alternatively, the secondary lien report maybe automatically and electronically delivered to a client immediatelyafter a secondary lien has been detected. The occurrence of thesecondary lien may trigger the system to automatically send thesecondary lien report to the client.

A secondary lien report may include data reporting the fact of asecondary lien, as well as the property address and the identity oridentities of the property owners. A secondary lien report may alsoinclude additional data pertaining to the subject property. For example,a secondary lien report may include any notices of foreclosure,foreclosure rescissions, final judgments, transactions involving theproperty, lien amounts, and contact information for other lenders. Taxdelinquency data may also be sent along with a secondary lien report.Tax delinquency may affect the total value of the property attainable,and thus also affect the LTV or CLTV. A secondary lien reportautomatically generated using a method of the present invention mayadvantageously lessen the time required to research one or moreproperties and liens associated with those properties, and therebyassist a client in assessing property values, calculating LTV or CLTVratios, or enable updating of property data within a loan portfolio.

In another embodiment, the secondary lien report and related data maynot be sent to the client directly, but are made available to a clientby allowing the client to download the report from a server accessibleover a network. In this case, a notification of a secondary lien may besent directly to a client. The notification may be sent concurrentlywith detection of the secondary lien distress, concurrently withgeneration of the secondary lien report, or after the secondary lienreport is available. In one embodiment, the secondary lien report andrelated data may be made accessible to the client using a File TransferProtocol (FTP). In another embodiment, secondary lien reports may begenerated periodically and uploaded to an FTP server. Alternativetime-frames may be used in different embodiments of the presentinvention. The client may then access uploaded reports using standardFTP client software and a login. In another embodiment, secureencryption may be used during a login and file-transfer process.

FIG. 3 is a flow chart depicting a method 300 for monitoring a loanportfolio for information related to secondary liens. In thisembodiment, a method 300 may allow a client to specify a frequency orfrequencies for automatic monitoring of secondary liens, and may allowautomatic updating of a loan portfolio when any secondary liens aredetected.

Method 300 may begin with step 302. In this step, property data may bereceived, e.g., by client input, from a loan portfolio for one or moreproperties that the client wishes to monitor for secondary liens. Next,in step 303, a client may specify one or more monitoring frequencies forloans within the loan portfolio entered in step 302. Any periodic ornon-periodic monitoring frequency may be specified. For example, asimple periodic monitoring frequency such as weekly or monthly may bespecified. Or, a client may specify a high monitoring frequency forproperties owned by mortgagors more likely to cause secondary liens, anda low monitoring frequency for properties owned by mortgagors lesslikely to cause secondary liens. In determining whether a property ismore or less likely to incur a secondary lien, a client may classifyproperties according to property owner characteristics. For example, amortgagor who is a first-time home buyer may be more likely to incur asecondary lien in order to make home improvements. Or, a mortgagorheavily encumbered with credit card debt may be more likely to incur asecondary lien in order to pay off debts at a lower interest rate. Or, amortgagor may have a history of encumbering properties with secondaryliens. In these cases, a client may wish to specify a higher monitoringfrequency.

On the other hand, in step 303, the client may wish to specify a lowermonitoring frequency for properties owned by mortgagors in a more stablefinancial condition and less likely to take out a secondary loan. Inaddition, a client may wish to vary a monitoring frequency according tochanging conditions, such as a prime interest rate or the LIBORreference rate. As interest rates fall, mortgagors may be more likely toencumber a property with a secondary lien, and vice versa. A client mayalso wish to vary a monitoring frequency according to a mortgagor'schange in status, such as years residing in the home, income level,credit score, etc. A client may specify in step 303 that if a thresholdis reached, or if a specified event should occur, the monitoringfrequency may change to a higher or lower monitoring frequency. Thesestatus, thresholds, credit scores, interest rates, and other conditionsor characteristics may be obtained from databases monitored in step 306,or described in the embodiment of system 400. Still other suchconditions, data, or predictors of mortgagor behavior may be related tolien distress events and the detection thereof, as described more fullyin related U.S. patent application Ser. No. ______, entitled METHOD ANDSYSTEM FOR MONITORING FOR AND REPORTING OF LIEN DISTRESS EVENTS, filedconcurrently herewith.

Once the monitoring frequency is input or received, the method mayproceed to step 304. In step 304, property address data and borroweridentification data may be extracted from the property data that wasinput or received in step 302. Note that step 304 may be unnecessary ifproperty data received in step 302 is received in proper format, inwhich case the method may proceed directly from step 303 to step 306.

In step 306, one or more lien detection databases may be monitored forsecondary liens related to property data received in step 302 and/orextracted in step 304. The lien detection databases may includedatabases that contain tax assessor records, public property records,title transfer records, and other sources that may contain evidence ofprimary or secondary liens. The method may then flow to decision step308.

In step 308, if a secondary lien is not detected during the monitoringstep, the method may execute process step 310. In step 310, a delay infurther processing may occur, according to a monitoring frequencyselected in step 303. In another embodiment, a delay may occur in step310 according to a default monitoring frequency. Once the delay durationhas been satisfied, the method may return to step 306 for additionalmonitoring.

In step 308, if a secondary lien is detected, the method may proceed tostep 314, or the method may execute optional step 312. In optional step312, credit report information may be obtained, for example, from acredit reporting database returning data in response to a querycontaining the borrower identification data. The information may be anentire credit report, or some portion thereof, on one or more borrowersassociated with the detected secondary lien. If step 312 is performed,the method may proceed to step 314. Step 314 may be a computationalstep, which may compute an AVM score for the subject property. In oneembodiment, information used in computing the AVM may be obtained duringthe database monitoring step 306. Another computation may be performedin step 315. Step 315 may compute a CLTV ratio. The CLTV ratio may becomputed based on primary and secondary lien information, outstandingtax liability, and the AVM score computed in step 314. Data used in step315 to arrive at a CLTV ratio may be received in step 302, may beobtained in step 306 or step 312, or may be computed in step 314.

In the next step 316, a secondary lien report may be generated as instep 216 of method 200. In addition, the secondary lien report generatedin step 316 may include the credit report information, the AVM score, orthe CLTV score obtained or computed in steps 312, 314, and 315,respectively. A final step in method 300 may be an updating step 318, inwhich property data obtained or computed during the process steps may beprovided to the client for updating property data within the client loanportfolio. In one embodiment, step 318 may include updating a clientloan portfolio with information related to any secondary liens detectedin step 306, such as the lender name associated with the secondary lienand the value of the secondary lien. In another embodiment, in step 318an updated electronic file representing the client loan portfolio may beprovided automatically to the client. In another embodiment, the updatedelectronic file may be provided in step 318 to the client upon requestby the client. In another embodiment, the updated electronic file may beprovided in step 318 to the client periodically, according to a periodspecified by the client or according to a default period, ornon-periodically according to the detection of a previously unknownsecondary lien.

FIG. 4 is a system 400 for updating a loan portfolio with information onsecondary liens according to an embodiment of the present invention. Anyof the foregoing methods of the invention may be executed as a series ofprocess steps using hardware and/or software modules shown in FIG. 4.

FIG. 4 may include three subsystems. The first subsystem may include oneor more client stations 420. For simplicity, only one such clientstation is depicted in the figure, although other embodiments arepossible which include any number of client stations. The secondsubsystem may include a file transfer protocol (FTP) server 430. Thethird subsystem may include a mainframe server 440. In one embodiment,mainframe server 440 may include a mainframe computer that also mayinclude, or has access to, one or more secondary lien databases. Clientstation 420 may communicate with FTP server 430 via a network link 450.FTP server 430 may communicate with mainframe server 440 via a networklink 460. Network links 450 and 460 may be separate local area networklinks or wide area network links, and may connect a plurality of clientcomputers, FTP servers, and mainframe servers in any conventionalconfiguration such as bus, star, or ring. In another embodiment, networklinks 450 and 460 may represent the same network, such as a local orwide area network or the Internet.

A client station 420 may include a computer 421 linked to a memory 422.In one embodiment, computer 421 may operate on a conventional platformdesigned for personal computers such as Windows, LINUX or Macintosh.Memory 422 may be any computer readable memory such as a hard disc,floppy disc, RAM, ROM, EEPROM, CD-ROM, flash memory, or other internalor external optical, magnetic, or solid-state device, or any combinationof the foregoing. In one embodiment, memory 422 may include a clientloan portfolio 423, a property data extraction module 424, a clientloans for monitoring database 425, and an FTP client software module426. In another embodiment, each of the client loan portfolio 423, theproperty data extraction module 424, the client loans for monitoringdatabase 425, and the FTP client software module 426 may be accessed orexecuted by computer 421

Client loan portfolio 423 may be a database or other archival storagemedium or software module for inputting, updating, and saving electronicdata. In one embodiment, a client may be a lender, a lien holder, or aninvestor, and client loan portfolio 423 may contain data associated witha plurality of the client's loans or prospective loans. Data stored onclient loan portfolio 423 may include records associated with each loanin the portfolio. Each record may contain information for each loan suchas a property address and borrower identification, and may include avariety of additional information associated with the loan or theproperty such as seller identity, property descriptions, appraisalinformation, selling price, loan amount, loan number, contractual terms,effective dates, insurance information, property tax information,closing statements, etc.

Property data extraction module 424 may be an application that allows aclient to identify which records, i.e., which loans, from its clientloan portfolio the client wishes to select for secondary lienmonitoring. Property data extraction module 424 may allow the client toextract key information from selected loans, and write the keyinformation to client loans for monitoring data file 425, which may be adatabase, a spreadsheet, a text file, or another type of data file. Keyinformation written to client loans for monitoring data file may be aminimum amount of information needed to perform secondary lienmonitoring for one or more loans from client loan portfolio 423. Oneexample of key information is property address data for each selectedloan. Another example of key information is borrower identification datafor each selected loan. Another example may be any combination of dataextractable from client loan portfolio associated with a single loan. Inone embodiment, key information extracted to client loans for monitoringdata file 425 may be written to a text file using specified numbers ofcharacters for each property and for other property data associated witheach property.

Once the client loan for monitoring data file 425 is created, it may beuploaded to FTP server 430 using FTP client software module 426. FTPclient software module 426 may be any appropriate FTP client softwarefor initiating communication with an FTP server 430 for the purpose ofexchanging or transmitting electronic files via network link 450. FTPclient software module 426 may enable computer 421 to perform filemanipulation operations such as uploading files, downloading files, andreading from or writing to files on a server or another computerconnected to network link 450. In one embodiment, FTP client softwaremodule communicates using a TCP/IP protocol.

FTP server 430 may upload client loans for monitoring data file 425 vianetwork link 450 and store it locally. In one embodiment, FTP server 430may include a computer 431 coupled to a memory 432. Computer 431 andmemory 432 may be similar to computer 421 and memory 422 of clientstation 420. In one embodiment, computer 431 may function as anapplication server dedicated to providing secondary lien monitoring andreporting services to one or more client stations 420. In anotherembodiment, computer 431 and memory 432 may form an enterprise serversuch as a Sun Microsystems computer running a UNIX-based Solaris orLinux operating system, or a Hewlett-Packard (HP) computer running aMicrosoft Windows operating system, or an IBM computer running aniSeries operating system, or equivalent.

FTP server 430 may store a local file version of client loans formonitoring data file 425 in the same or similar format used on clientstation 420. Alternatively, it may store the information contained inclient loans for monitoring data file 425 in a different format. Oneexample format for this information stored in memory 432 is a text file,labeled in the figure as Loandata.txt file 434. In one embodiment, theinformation from client loans for monitoring data file 425 may bewritten as Loandata.txt file 434 to FTP server 430 using a Secure SocketLayer (SSL) encryption. In another embodiment, the loan data is writtenas a text file and encrypted with 1024-bit PGP encryption and thentransferred to FTP server. 430. This file may list properties in acharacter delimited, space delimited, or fixed format file. Inalternative embodiments, other types of encryption security may be used,although no encryption may be in some embodiments. An FTP serversoftware module 433 enables uploading and downloading of files to andfrom FTP server 430 via network links 450 and 460.

Any of the methods according to the present invention may be implementedthrough interaction between FTP server 430 and mainframe server 440.Mainframe server 440 may be any computer or computer system capable ofserving a plurality of users simultaneously and performing bulk dataprocessing requests for public records and/or consumer statistics andinformation. The hardware of mainframe server 440 is represented in thefigure as computer 441. Computer 441 is coupled to a memory 442, whichmay be any type of memory or combination of memory devices known in theart. Memory 442 may contain operating system software, software modules,applications, and data executable and/or accessible by computer 441. FTPserver software module 443 accessible by computer 441 enables uploadingand downloading of files to and from mainframe server 440 via networklink 460.

Client loan information to be monitored for secondary liens contained onFTP server 430 in a file such as Loandata.txt file 434 may be downloadedto mainframe server 440 via network link 460. In an embodiment usingSSL, Loandata.txt file 434 may be encrypted by FTP server 430 prior totransmission, and decrypted by mainframe server 440 after receipt. Oncedownloaded, and (if necessary) decrypted, computer 441 may execute datastandardization module 444 to re-form key information associated withthe client loans into a standardized format that is readable by adatabase search engine 446. The key information, now in standardizedformat, may be stored in a client loans updating module 445.

Client loans updating module 445 may be created upon an initialdownloading (or receipt) of client loan information from a particularclient. There may be one client loans updating module 445 for eachclient using mainframe server 440 for secondary lien monitoring. If aclient loans updating module 445 has been previously established for aclient when a subsequent downloading of client loan information for thesame client is standardized by data standardization module 444, theclient loans updating module 445 may be updated with the newinformation. In this way, a mainframe server 440 can maintain up-to-daterepresentation of a loan portfolio for each client that it serves.

Database search engine 446 may monitor for secondary liens associatedwith a client loan portfolio by querying one or more databases. Queryingmay occur according to a default or pre-selected frequency. In oneembodiment, database search engine 446 may monitor the databases for anyliens recorded subsequent to the most recent search. Examples of thesedatabases are a transactions database 447, which may store informationrelated to real estate sales or title transfer transactions; a propertydatabase 448, which may store information about real property such asliens and/or tax liability; and a credit report database 449, which maystore credit related data for consumers (e.g., Equifax, Experian, TRW).The contents of a query to one of these databases may use keyinformation retrievable from client loans updating module 445. A querymay be presented to a records database 447, 448, 449 in such a way thatthe records database may return a secondary lien when key information(e.g., property address or borrower identification) or otherstandardized client loan information matches information associated withthe secondary lien recorded in records database 447, 448, and 449. Arecords database may be queried in this manner according to apredetermined frequency, or periodically as specified by a client.

While monitoring for secondary liens, whenever a secondary lien isdetected that relates to a loan in a client loan portfolio, computer 441may initiate notification of the secondary lien in the form of anelectronic communication transmitted to the client over network link460. FTP server software module 443 may be used to effect thiscommunication. In addition, computer 441 may execute report generatingmodule 452, which creates a secondary lien report listing the secondaryliens detected in one or more records databases 447, 448, and 449. Thesecondary lien report may include information describing one or moresecondary liens, the property or properties associated with thesecondary liens, borrower identification, and other informationassociated with the property or borrowers. For example, an AVM may becomputed using an AVM calculation module 450, and the AVM score may beincluded in the secondary lien report. Data used to compute the AVM maybe obtained from one or more records databases 447, 448, and 449.

In another example, a CLTV ratio may be computed using a CLTVcalculation module 451. The CLTV ratio may also be included in thesecondary lien report. Data used to compute the CLTV ratio may also beobtained from one or more of records databases 447, 448, and 449.

In one embodiment, the secondary lien report may be saved as a textfile, and the text file may be character delimited, space delimited orin a fixed format. The report may be stored in memory 442, encrypted,and/or transmitted using SSL (if necessary) as a form of notification toa client via network link 460 by computer 441 using FTP server softwaremodule 443. When uploaded to FTP server 430, the report may be saved inmemory 432. In one embodiment, the report may be saved in memory 432 onFTP server 430 as Extract.txt file 435. In another embodiment,Extract.txt file may be an updated version of Loandata.txt, appendedwith newly discovered secondary lien information. In another embodiment,a notification of the availability of Extract.txt file for downloadingmay be transmitted to a client electronically via fax or e-mail, or theExtract.txt file itself may be transmitted to the client electronically.

A client may retrieve a secondary lien report by downloading Extract.txtfile 435 from FTP server 430 using SSL or other encryption (ifnecessary), and the appropriate FTP client and server software modules.Using appropriate software, computer 421 may convert Extract.txt file435 into a form readable by a client, for example, by displaying thetext or printing a hard copy. Extract.txt file 435 may be saved inmemory 426 for later review. The client may thus be apprised of anysecondary liens affecting property associated with loans in the clientloan portfolio 423. In another embodiment, client station 420 may alsoupdate loan records in client loan portfolio 423 with secondary lieninformation received in Extract.txt file 435.

The invention has been disclosed in an illustrative manner. Accordingly,the terminology employed throughout should be read in an exemplaryrather than a limiting manner. Although minor modifications of thepresent invention will occur to those well versed in the art, it shallbe understood that what is intended to be circumscribed within the scopeof the patent warranted hereon are all such embodiments that reasonablyfall within the scope of the advancement to the art hereby contributed,and that that scope shall not be restricted, except in light of theappended claims and their equivalents.

1. A computer-based method of updating a loan portfolio with informationon secondary liens, comprising: receiving property data from a clientloan portfolio; monitoring for secondary liens relatable to the propertydata; and if a secondary lien relatable to the property data isdetected, sending a notification to a client of the secondary lien. 2.The method of claim 1 further comprising, if a lien distress eventrelatable to the property data is not detected, setting a negativestatus indicator in the monitored property data.
 3. The method of claim1 further comprising repeating the monitoring step periodically.
 4. Themethod of claim 1 further comprising standardizing the property data,wherein the standardizing step comprises extracting property addressdata from the property data.
 5. The method of claim 4 wherein thestandardizing step comprises extracting borrower identification datafrom the property data.
 6. The method of claim 4 wherein thestandardizing step further comprises extracting property address dataand borrower identification data from the input property data, andwherein the monitoring step comprises monitoring a public recordsdatabase for lien distress events relatable to the property address dataand, if a secondary lien relatable to the property address data isdetected, obtaining credit report information relatable to the borroweridentification data.
 7. The method of claim 6 further comprising, if asecondary lien relatable to the property data is detected, computing anAVM score.
 8. The method of claim 1 further comprising, if a secondarylien relatable to the property data is detected, generating a secondarylien report including the AVM score.
 9. The method of claim 8 furthercomprising, if a secondary lien relatable to the property data isdetected, including credit report information in the secondary lienreport.
 10. A computer-based method of updating a loan portfolio withinformation on secondary liens, comprising: inputting property data froma client loan portfolio for client loans to be monitored; inputting oneor more monitoring frequencies; monitoring one or more databases forsecondary liens relatable to the client loans to be monitored; if asecondary lien relatable to the client loans to be monitored is notdetected, periodically monitoring the one or more databases according tothe one or more monitoring frequencies; and if a secondary lienrelatable to the client loans to be monitored is detected, computing anAVM score; computing a CLTV score; and generating a secondary lienreport.
 11. The method of claim 10 further comprising updating the inputproperty data from the client loan portfolio according to informationcontained in the secondary lien report.
 12. The method of claim 11wherein the updating step further comprises sending the secondary lienreport to a client upon client demand.
 13. The method of claim 11wherein the input property data is received as an electronic file, andwherein the updating step further comprises generating a new version ofthe electronic file to include secondary liens detected during themonitoring step.
 14. The method of claim 10 further comprising, prior tothe monitoring step, extracting borrower identification data from theinput property data.
 15. The method of claim 12 further comprising if asecondary lien relatable to the client loans to be monitored isdetected, obtaining credit report information based on the borroweridentification data.
 16. A system for updating a loan portfolio withinformation on secondary liens, comprising: a client station inputtingloan data for monitoring; an FTP server uploading from the clientstation the loan data; and a mainframe server comprising a databasesearch engine for searching one or more databases for secondary liensrelatable to the loan data, and a report generating module for reportingto the client station via the FTP server secondary liens relating to theloan data.
 17. The system of claim 16 wherein the mainframe serverfurther comprises a data standardization module for standardizing theloan data.
 18. The system of claim 16 wherein the mainframe serverfurther comprises an AVM calculation module for generating an AVM forproperty associated with the loan data.
 19. The system of claim 16wherein the mainframe server further comprises a CLTV calculation modulefor generating a CLTV ratio for property associated with the loan data.20. The system of claim 16 wherein the mainframe server furthercomprises a transactions database, a property database, and a creditreport database for detecting secondary liens associated with the loandata.